Deposit Insurance (DICGC) in India: Protection for Bank Deposits

Introduction: Is Your Money Safe in the Bank?

When PMC Bank collapsed in 2019, lakhs of depositors suddenly found their life savings frozen. When Yes Bank faced a crisis in 2020, panic spread among account holders. The question that haunts every depositor during such crises: “What happens to my money if my bank fails?”

This is where DICGC—Deposit Insurance and Credit Guarantee Corporation—comes in. It’s the silent guardian of your bank deposits, promising to return up to ₹5 lakhs if your bank ever fails. Understanding DICGC coverage is essential for every Indian with a bank account.

What is DICGC?

Overview

DICGC (Deposit Insurance and Credit Guarantee Corporation):

• Wholly owned subsidiary of RBI
• Established in 1978 (merged DICGCI and CGCF)
• Headquarters: Mumbai
• Provides deposit insurance to all banks

Legal Framework

• Deposit Insurance and Credit Guarantee Corporation Act, 1961
• DICGC General Regulations, 1961
• Amendments in 2021 (enhanced coverage and faster claims)

Core Function

Insurance for Bank Deposits:

• Protects depositors if bank fails
• Maximum coverage: ₹5,00,000 per depositor per bank
• Automatic coverage (no application needed)
• Premium paid by banks, not depositors

How Much is Covered?

Coverage Limit

Maximum Protection: ₹5,00,000 (Five Lakhs)

This includes:

• Principal amount
• Interest accrued up to the date of cancellation/liquidation

What Does “Per Depositor Per Bank” Mean?

Example:

Ramesh has deposits in ABC Bank:
- Savings Account: ₹2,00,000
- Fixed Deposit: ₹4,00,000
- Total: ₹6,00,000

DICGC Coverage: ₹5,00,000 (maximum)
Ramesh loses: ₹1,00,000 (uninsured)

Multiple Accounts, Same Bank

All accounts by the same depositor in the same bank are aggregated:

Different Capacities = Separate Coverage

You get separate ₹5 lakh coverage for each capacity:

Example:

Priya's deposits in same bank:
1. Individual savings: ₹5 lakh → Covered fully
2. Joint account with husband: ₹5 lakh → Covered separately
3. As proprietor of business: ₹5 lakh → Covered separately

Total deposits: ₹15 lakh
Total coverage: ₹15 lakh (all covered!)

Joint Accounts Special Rule

Joint accounts are treated separately from individual accounts.

If Priya and Ravi have:

• Priya’s individual account: ₹5 lakh
• Ravi’s individual account: ₹5 lakh
• Joint account (Priya + Ravi): ₹5 lakh

All three accounts get separate ₹5 lakh coverage!

What’s Covered?

Types of Deposits Insured

✅ Covered:

• Savings bank accounts
• Current accounts
• Fixed deposits (FD)
• Recurring deposits (RD)
• Cumulative and other deposit accounts
• NRE/NRO deposits (rupee)

What’s NOT Covered?

❌ Not Covered:

• Foreign currency deposits (FCNR)
• Deposits of foreign governments
• Deposits of central/state governments
• Inter-bank deposits
• Deposits of state land development banks with state cooperative banks
• Any deposits specifically exempted by DICGC

Banks Covered

✅ Insured Banks:

• All commercial banks (public sector, private, foreign)
• Regional Rural Banks (RRBs)
• Local Area Banks
• Small Finance Banks
• Payments Banks
• Cooperative banks (registered under state/central acts)

❌ Not Insured:

• Primary Agricultural Credit Societies (PACS)
• Cooperative societies (non-banking)
• NBFCs (Non-Banking Financial Companies)

2021 Amendment: Faster Claims

Before 2021

Old Process:

• Coverage was ₹5 lakh (increased from ₹1 lakh in 2020)
• But payment happened only after liquidation
• Could take years
• PMC Bank depositors waited with uncertainty

After 2021 Amendment

New Features:

1. Interim Payment:

• Within 90 days of moratorium/license cancellation
• Don’t have to wait for full liquidation

2. Defined Timeline:

3. Enhanced Transparency:

• Clear process defined
• Depositor rights strengthened

How DICGC Works

Premium Payment

Who Pays? Banks pay the premium, not depositors.

Premium Rate:

• Currently 12 paise per ₹100 of deposits per year
• 0.12% of deposits annually

Payment:

• Banks pay to DICGC
• Part of their operating cost
• Depositors don’t pay anything extra

Insurance Fund

DICGC Maintains:

• Deposit Insurance Fund
• Built from premiums collected
• Used to pay claims

Fund Size (2024):

• Approximately ₹1.6+ lakh crore
• Growing every year

When Does Insurance Kick In?

Triggering Events:

1. RBI cancels bank’s license
2. Bank goes into liquidation
3. RBI imposes moratorium and directs payment

Note: Insurance doesn’t apply if bank is operational (even if struggling).

Claims Process

Automatic Coverage

You don’t need to apply for coverage.

• All eligible deposits are automatically insured
• No registration required
• No separate policy

Claim Settlement Process

Bank Failure/License Cancellation
        ↓
RBI notifies DICGC
        ↓
Bank provides depositor list (within 45 days)
        ↓
DICGC verifies claims
        ↓
Payment to depositors (within 90 days)
        ↓
Depositor receives up to ₹5 lakh

Payment Method

• Direct credit to depositor’s account (if known)
• Cheque/demand draft
• Through liquidator (if full liquidation)

What Depositors Need to Do

Keep Records:

• Account statements
• Fixed deposit receipts
• Passbook updated
• KYC documents current

In Case of Bank Failure:

1. Don’t panic
2. Wait for official communication
3. Verify your details with liquidator
4. Claim will be processed automatically

Maximizing Your DICGC Coverage

Strategy 1: Multiple Banks

Instead of: ₹20 lakh in one bank (only ₹5 lakh covered)

Do: ₹5 lakh in Bank A + ₹5 lakh in Bank B + ₹5 lakh in Bank C + ₹5 lakh in Bank D (All ₹20 lakh covered!)

Strategy 2: Use Different Capacities

Example: Same bank, but different capacities:

• Individual account: ₹5 lakh
• Joint with spouse: ₹5 lakh
• As proprietor: ₹5 lakh
• PPF (not deposit, but government guaranteed)

Strategy 3: Family Distribution

Important Considerations

Trade-offs:

• Multiple accounts = multiple minimum balances
• Operational complexity
• Interest rate differences
• For most people, bank failure is rare

Reality Check:

• Large PSBs and private banks rarely fail
• Systemic banks protected (too big to fail)
• Cooperative banks and small banks carry more risk

Which Banks Are Riskier?

Lower Risk (Strong Coverage + Low Failure Probability)

Public Sector Banks:

• Government backing
• Too big to fail (SBI, BoB, PNB)
• DICGC coverage is extra safety

Large Private Banks:

• Strong capital
• Diversified
• Systemically important (HDFC, ICICI, Axis)

Higher Risk (DICGC Coverage More Important)

Cooperative Banks:

• Governance issues
• Localized operations
• PMC Bank example

Small Banks:

• Less diversified
• Regional concentration

Payments Banks:

• Newer institutions
• Limited business model

DICGC vs Global Deposit Insurance

Observation: India’s coverage is lower in absolute terms but covers multiple of per capita income.

Recent Bank Failure Cases

PMC Bank (2019)

What Happened:

• Fraud discovered (HDIL exposure)
• RBI imposed restrictions
• Depositors couldn’t withdraw

DICGC Role:

• Coverage applicable
• Resolution still ongoing
• Led to 2021 amendment for faster payments

Yes Bank (2020)

What Happened:

• Massive NPAs discovered
• RBI imposed moratorium
• SBI-led consortium rescued

Outcome:

• Bank survived (no DICGC claim)
• Depositors eventually got full access
• Stock diluted, but deposits safe

Lakshmi Vilas Bank (2020)

What Happened:

• Capital inadequacy
• RBI merged with DBS India

Outcome:

• Seamless transition
• Depositors fully protected
• No claim on DICGC

Lesson

Most bank stress situations are resolved without liquidation through:

• Mergers
• Recapitalization
• Restrictions and recovery

Common Myths Debunked

Myth 1: “Only savings account is covered”

Reality: All deposit types (savings, FD, RD, current) are covered.

Myth 2: “I need to register for DICGC”

Reality: Coverage is automatic. No registration needed.

Myth 3: “DICGC covers my NBFC deposits”

Reality: Only bank deposits are covered. NBFC deposits are NOT covered.

Myth 4: “My ₹10 lakh FD is fully covered”

Reality: Only ₹5 lakh is covered. Consider splitting across banks.

Myth 5: “Interest is not covered”

Reality: Accrued interest up to liquidation date is included in coverage.

Myth 6: “Joint account coverage is shared”

Reality: Joint account is treated as separate capacity—gets its own ₹5 lakh.

Checking if Your Bank is Insured

How to Verify

1. RBI Website: Check list of scheduled banks
2. DICGC Website: List of insured banks (dicgc.org.in)
3. Bank Disclosure: Banks display DICGC membership

What to Look For

✅ “DICGC Insured” logo or mention ✅ Listed as scheduled bank ✅ RBI-regulated (not just registered)

Red Flags

❌ NBFC claiming deposit insurance ❌ Cooperative society (not bank) accepting deposits ❌ Unregistered chit funds claiming protection

Key Takeaways

1. ₹5 lakh coverage – Maximum per depositor per bank
2. Automatic coverage – No application needed
3. Banks pay premium – Not depositors
4. 90-day timeline – For interim payments (post-2021)
5. Different capacities – Get separate coverage
6. Multiple banks – For amounts above ₹5 lakh
7. NBFCs not covered – Only bank deposits

Disclaimer

This article is for educational purposes only. DICGC coverage rules may change. For official information, refer to dicgc.org.in. This is not financial advice. Bank failures are rare, but prudent diversification is wise.

Frequently Asked Questions

Q: Is my savings account automatically insured? A: Yes, if your bank is a DICGC member (almost all banks are).

Q: How do I file a claim? A: You don’t need to. DICGC works through the liquidator when a bank fails.

Q: Is NRI deposit covered? A: NRE and NRO (rupee) deposits are covered. FCNR (foreign currency) deposits are not.

Q: What about cooperative banks? A: Most cooperative banks are now DICGC members (post-2020 amendment).

Q: If my bank is merged, do I lose coverage? A: No. In mergers, deposits continue seamlessly. No DICGC claim needed.

Q: Can I get more than ₹5 lakh if I have different accounts? A: Same bank, same capacity = combined. Different capacities (individual, joint, proprietor) = separate coverage.

Q: How long does DICGC take to pay? A: Target is 90 days from moratorium/license cancellation (post-2021 rules).

DICGC is your financial safety net—silent, automatic, and always there. While bank failures are rare in India, knowing your deposits are protected up to ₹5 lakhs brings peace of mind. For larger amounts, smart diversification across banks is simple insurance.